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Brother Group
New Mid-Term Business Strategy
2 © 2016 Brother Industries, Ltd. All Rights Reserved.
Outline of CS B2018
3 © 2016 Brother Industries, Ltd. All Rights Reserved.
Targets and results of sales and operating profit
in CS B2015
JP GAAP base
4,974 5,161
6,168
7,072
7,550 7,500
CS B2015
Target
2015
Forecast
2014 2013 2012 2011
342
298
433
575
430
580
Sales
[100 million yen] Operating Profit
[100 million yen]
CS B2015
Target
2014 2013 2012 2011
In CS B2015, we achieved the target sales and came close to the target operating profit in FY2014.
2015
Forecast
1. Financial forecasts for the third quarter of FY2015
1 1
4 © 2016 Brother Industries, Ltd. All Rights Reserved.
CS B2015 Review and CS B2018 Vision
CS B2015, as a foothold for achieving the mid- to long-term “Global vision 21”
goals of 1T yen in sales and 10% operating margin, set targets at 750B yen
sales, 58B yen in operating profit, and 7.7% in operating margin.
Sales expected to reach 755B yen as a result of efforts made by existing
businesses and strategic investments to bring new growth platforms such as
Domino in UK and Nissei in Japan into the Brother group, as well as a
favorable currency environment.
On the other hand, although operating profit reached 57.5B yen in FY 2014,
the rapid deterioration of the business environment since early 2015 has
resulted in a FY 2015 operating profit estimate of only 43.0B yen.
Taking the challenge of a changed environment very seriously, we will focus
the next 3 years on the structural transformation of our existing businesses to
ensure a “Strong Brother” positioned to win and deliver profit no matter how
challenging the external business context is.
5 © 2016 Brother Industries, Ltd. All Rights Reserved.
Corporate policy in CS B2018
“A multi-business enterprise with resilient DNA and a track record of
success that continually evolves to deliver profitable growth by
meeting the challenges of changing times and environments”
5 © 2016 Brother Industries, Ltd. All Rights Reserved.
Our aspiration for Brother:
6 © 2016 Brother Industries, Ltd. All Rights Reserved.
Three reforms to support our corporate policy
Reinforce customer value
creation capability for the
future by optimizing use of
limited resources and focusing
on efficiency
Thoroughly review different
operations across the entire
group and shift as many
resources to customer value
creation as possible
Optimize operating processes
and build a flexible and strong
value chain which enables full
utilization of limited resources
Establish a functional center of
excellence to work across
business divisions to sharpen
manufacturing know how
(including future technology) and
customer value creation insights
Cultivate the next generation of
leadership talent in the context
of Brother’s unique DNA and
optimize talent deployment
across the group
Foster next generation talent
who will build new businesses
and lead the group to growth in
the context of portfolio
realignment
Cultivate a global talent pool to
carry on the key elements of
Brother’s unique DNA:
‘differentiated manufacturing,’
‘Brother pride,’ and ‘the “At your
side.” spirit’
Maximize the capabilities and
contribution of Brother’s diverse
talent pool by optimizing HC
allocation, career development
and evaluation across the group
2 3
Enhance profitability and ability to
generate cash in existing
businesses/products in mature
markets (including printing)
Invest mainly in growth
businesses that lead to industrial
printing, factory automation, and
solution fields in order to
strengthen industrial areas
Evaluate new business growth
options and focus on building new
businesses in a limited number of
priority areas
Transition from a printing-
focused business to a portfolio-
based multi-business enterprise
1 Business reform Operational reform Talent reform
7 © 2016 Brother Industries, Ltd. All Rights Reserved.
Concept of strengthen our businesses in CS B2018
Concept of strengthen our businesses in CS B2015
Policy to strengthen our businesses in CS B2018
Reallocation of HR/
investment Expected to be growth drivers of the entire group Expected to contribute to overall group profit as future cash cow groups
Communications &
Printing equipment
Promote growth strategies across all businesses
Placed the printing related business as the primary axis inside the head office, and growth strategies
promoted across all businesses
E- stationery
P&H M&S N&C New
business
Growth business
New business Communications
& Printing equipment
N&C
Businesses for profitability
enhancement Growth businesses and new
businesses
• Domino business
• Industrial printing • Factory automation • Solution
• P&H • E-stationery • Machinery business
Clearly differentiate between “businesses for profitability enhancement” and “businesses for growth” and reallocate our resources to strengthen the portfolio
8 © 2016 Brother Industries, Ltd. All Rights Reserved.
How to proceed with new
businesses in CS B2018
Strategies for new businesses
Sewing solution
Industrial printing
Craft business
Garment printer
Adjacent areas of machine
tools Domino
Home sewing machine
Industrial sewing
machine
Machine tools
Electric stationery/Office
OA solution
Special-purpose solution
Focus efforts in areas that
are an extension of
existing businesses and
can be expected to
produce sales within 3
years
1. Industrial printing
2. Factory automation
3. Solution
Establish a systemized
business-creation process
and promote business
development under
adequate financial
discipline
Image of expansion from core area to new areas
New areas
Growth
areas
Solution
Industrial printing Factory automation
9 © 2016 Brother Industries, Ltd. All Rights Reserved.
Industrial areas continuing on from CS B2015
産業用領域
Image of CS B2015 business areas1 Image of business areas in the future Image of CS B2018 business areas1
Strengthen our portfolio to become a multi-business
enterprise
1 “Industrial area” includes solution. “Home/culture” means P&H and N&C.
Industrial equipment
Industrial sewing
machine
Industrial parts
Domino Industrial printing
Factory automation
Special-purpose solution
OA solution
Image of transition in business areas
Industrial areas aiming for expansion in CS B2018
Industrial area
Printing
Industrial area
Printing Printing
Industrial area *1
Home/
culture Home/
culture
Home/
culture
+
10 © 2016 Brother Industries, Ltd. All Rights Reserved.
Strategy for each business segment
11 © 2016 Brother Industries, Ltd. All Rights Reserved.
P&S business policy Quantitative target
Printing & Solutions business
2015 expected1 2018 goal
4,013 4,130
530 463
Firmly maintain global No.1 in
Home/Office business with a steady
profitability and make a full-scale entry
into solution business for further growth
Protect No.1 position and profitability in
Office
Strategic entry into solution business
Communi-
cations &
Printing
equipment
*The operating profit above indicates the profit and loss of the entire P&S
business.
E-stationery
Sales Revenue [100 million yen]
Operating Profit [100 million yen]
244 (6.1%)
300 (7.3%)
E-
stationery
Communi-
cations &
Printing
equipment
Reposition from overall company growth
driver to profit generator supporting
portfolio enhancement
■Sustain No.1 position in SOHO business
■Thorough implementation of efficiency
improvement to enhance profitability
■Focused investment into areas of reliable
profit contribution 3,550 3,600
Exchange rate
1USD=115Yen 1EUR=130Yen
1.Reference values for comparison with FY2018; They do not correspond to the full-year financial
forecasts announced in the statements for the third quarter of FY2015.
12 © 2016 Brother Industries, Ltd. All Rights Reserved.
Structural reform in P&S business
Entry into P&S solution businesses
Provide total
solutions with
Brother’s unique OA
equipment
Entry into solution businesses
Reduction in fixed costs by shifting resources
to growth businesses
Thoroughly enhance efficiency in
development structure
Optimize production structure and promote
automation
Restructure our global sales structure and
optimize sales promotion cost
Provide safe and outstanding quality products
for customers
Develop special-
purpose solutions
13 © 2016 Brother Industries, Ltd. All Rights Reserved.
Machinery business
Machinery business policy Quantitative target
1,020 1,180
400 323
Industrial sewing
machine
Sales Revenue [100 million yen]
Operating Profit [100 million yen]
Machine
tools
Transition from industrial sewing machines to
industrial sewing solution
Counterattack in industrial sewing machine market with
differentiated lock stitch products
Ride the wave of automation and introduce IoT
enablement and new products/services
Evolve the garment business with an eye to the future
Industrial
sewing
machine
Industrial
parts
Recover profitability through structural reform and
contribute to strengthening of B2B business
■ Enhance profitability as a business (reducers, high-
precision gears)
■ Pursue synergy with other machinery businesses
183
514
323
230
550
400
machine tools
Industrial parts
108 (10.6%)
125 (10.6%)
*The operating profit above indicates the profit and loss of the entire
Machinery business.
2015 expected1 2018 goal
Exchange rate
1USD=115Yen 1EUR=130Yen
Take share in the market for No.40 taper spindle
machines and provide solution by strengthening
fundamentals of business in Automobile-related market
Build share in Automobile-related market and
strengthening fundamentals of business
Boost growth by providing solution, including
products in surrounding areas
1.Reference values for comparison with FY2018; They do not correspond to the full-year financial
forecasts announced in the statements for the third quarter of FY2015.
14 © 2016 Brother Industries, Ltd. All Rights Reserved.
Factory
Automation
Expand into factory automation areas
Move into the sewing solution business with strategic lock stitch models, enhanced product
lines, and IoT enablement
Further increase productivity and take share in the large parts machining market by strategic
models, such as multitasking machines and machines for machining large parts
15 © 2016 Brother Industries, Ltd. All Rights Reserved.
Domino business/Industrial Printing business
Domino policy Industrial printing business policy
Strengthen industrial printing
business areas with Brother’s
products that we have focused
on since CS B2015 Expand the range of industrial printing
products in areas that are adjacent to
existing businesses
Launch industrial printing products in
new categories
Maximize synergy as the Brother’s next pillar of growth Target revenue CAGR 9% in the next 5 years as the core growth area
Expand business by enhancing Domino's sales strength and
collaboration with Brother's technological capacity
Enhance market position in coding & marking field
Expand digital printing
Sales Revenue [100 million yen]
Operating Profit [100 million yen]
641
860
2018goal
46 (7%)
80 (9%)
120 (12%)
2020goal
990
+9%
2015expected1
*1.Reference values for comparison with FY2018 (adjusted to 12-month basis); They do not correspond to the full-year
financial forecasts as of the closing date for the third quarter of FY2015.
Exchange rate 1GBP=179Yen
16 © 2016 Brother Industries, Ltd. All Rights Reserved.
Expansion policy in industrial printing fields
Expand coding & marking
business
Make a big leap in digital
printing field
New industrial
printing
business
that
leads the group
to growth
Expand the range of
Brother’s industrial
products
17 © 2016 Brother Industries, Ltd. All Rights Reserved.
Personal & Home Business/
Network & Contents Business
Personal & Home Business policy
Maintain dominant global No. 1 position for the
full range of high-end to low-end machines
while stepping up to a new level of “joys of
creation” Firmly maintain current position in home sewing machines while
strengthening profitability in the high-end market
Expand share in the mid-range market
Aggressive pursuit of growth in the craft market
Network & Contents Business policy
Drive structural reforms to reposition as a cash
Achieve business operating profit rate 5%
Calibrate investments to ensure cash generation
Accelerate enhancement of profitability by defining criteria for ROI and
profitability
Operating Profit [100 million yen]
552 560
2015expected1 2018goal
15 (2.7%)
30 (5.4%)
Sales Revenue [100 million yen]
Operating Profit [100 million yen]
487 570
2018goal
41 (8.4%)
50 (8.8%)
2015expected1
Sales Revenue [100 million yen]
Exchange rate
1USD=115Yen 1EUR=130Yen
Exchange rate
1USD=115Yen 1EUR=130Yen
1.Reference values for comparison with FY2018; They do not correspond to the full-year financial
forecasts announced in the statements for the third quarter of FY2015.
18 © 2016 Brother Industries, Ltd. All Rights Reserved.
Promotion structure for CS B2018
Fu
nctio
n
HQ
Production Strategy Planning
Basic Engineering Technology
Purchasing Engineering Development
IJ Production
Development Planning
Production Innovation
Customer Satisfaction Quality Management
Mechanical Basic Technology Development
Software Technology Development
Electronic Technology Development
IJ Technology Development
Bu
sin
es
s
P&S
Internal Audit
Corporate Planning
CSR & Corporate
Communication
Law, Environment &
General Affairs
MIS Intellectual Property
Human Resource
Finance & Accounting
New Business Development
Business Planning
Development
Production
L&M
SOHO and Emerging
Country Business
Development
SMB and S&S Business
Development
LE Development
Production
LC Development
IDS Development
President
Production & Engineering
Center
Development center
Marketing Strategy Center
Quality Innovation
Center
Basic
po
licy
Deta
ils o
f org
an
izatio
nal
ch
an
ge
Organizational change policy
Sales & Marketing Strategy Development
Design Business Support
・・・ Group company
P&H
Business Planning
Sales & Marketing
Development
Production Innovation
QM and CS
Craft Business
Development
Machinery
Business Planning
Strategic Technology
Production
Development
Machine Tools CS Planning
Quality Management
Industrial Sewing Machine Sales
Machine Tools Sales
Nissei XING
Network System Business
Development
N&C Domino
Domino Business
Domino
Industrial Printing
Business
Industrial System Sales &
Marketing
New Technology
Development
Shift to a “flat” structure of
equally positioned business
divisions to facilitate portfolio
strengthening and establish a
foundation for renewal by re-
engaging with customers
across the entire group
HQ: Establish a small but strong HQ
dedicated to driving efficiency
enhancement and infrastructure
improvement to support reforms
Business: Further strengthen the integrated
business management with a
flexible structure
Function: Create future customer value by
working across business
divisions and strengthen global
ties between divisions by
promoting HR development and
reallocation
Business Planning
19 © 2016 Brother Industries, Ltd. All Rights Reserved.
Management targets
20 © 2016 Brother Industries, Ltd. All Rights Reserved.
244
300
108
125 46
80
41
50
15
30
10
15
3,550 3,600
463 530
514 550
323 400 183 230
641
860 487
570 552
560 142
200
FY2018 Performance goals Breakdown by business segment
2018
7,500
2015
6,854
2018
600
2015
465
1
:Printing :Home/culture :Industrial :Others
CS B2018 Performance goal
750B
yen
60B
yen
8.0%
Sales Revenue [100 million yen] Operating Profit [100 million yen]
Sales
Revenue
Operating
Profit
Operating
Profit
Rate
Communications & Printing equipment
machine tools
Industrial sewing machine
Industrial part
Domino
P&H
N&C
Others
P&S
P&H
Machinery
Domino
N&C
Others
E-stationery Industrial equipment
Industrial sewing machine
Industrial part
1
E-stationery
Communications & Printing equipment
IFRS base
Exchange rate 1USD=115Yen
1EUR=130Yen
1.Reference values for comparison with FY2018(Domino business was adjusted to 12-month basis); They do not correspond to the full-year financial
forecasts announced in the statements for the third quarter of FY2015.
21 © 2016 Brother Industries, Ltd. All Rights Reserved.
Financial policy
Investme
nt policy
R&D investment/Capital investment
Minimize investments in the businesses for profitability enhancement with an
aim to improve efficiency for structural reform
Carry out selective core investments in growth areas and new businesses
M&A
Focus on flexible, small-scale M&A in order to strengthen growth businesses
and new businesses
Respond flexibly when given opportunities to enhance our business portfolio
Basic
policy
Promote financial measures to strengthen our business portfolio for driving
reforms according to the management strategy
Aim for a capital adequacy ratio of 50% to maintain a healthy financial condition
Put a priority on maintaining dividend payments for shareholders even in a
severe business environment
Mainly focus on strengthening our business portfolio during three years
22 © 2016 Brother Industries, Ltd. All Rights Reserved.
Financial policy
Aim to achieve ROE exceeding 9% in the end of CS B2018
Promote reform and thoroughly implement efficiency improvement
Improve asset efficiency by thorough reductions in inventory
Sharehol
der return
ROE
In principle, maintain steady dividend payments in the conventional manner,
aiming for a consolidated dividend payout ratio of 30%
23 © 2016 Brother Industries, Ltd. All Rights Reserved.